The German government and leading banks injected billions of euros into the struggling mortgage lender Hypo Real Estate, which found itself on the brink of bankruptcy.
Hypo Real Estate in Munich announced that when it faced a funding shortfall, a consortium of banks came to its aid, granting it loans to help bridge its problems. The bank did not wish to disclose details about the banks involved or the amounts of the loans received. However, sources in the coalition government of Chancellor Angela Merkel indicated that the government participated in the package, which could total up to 35 billion euros (50 billion dollars), making this bank the largest German casualty of the global financial crisis to date. From the same sources, it was further learned that German Finance Minister Peer Steinbrueck briefly informed party leaders about the crisis.
Hypo Real Estate had previously entered into emergency negotiations with the German banking regulator BaFin and the German Ministry of Finance to find solutions to its problems. This second-largest lender in the commercial real estate sector, whose shares are among the 30 leading companies included in the Frankfurt DAX index, became a victim of speculative activities by its own German-Irish subsidiary Depfa. Depfa had been undertaking long-term projects with massive loans and generally secured last-minute refinancing, which is no longer possible. Hypo Real Estate announced that it had entered into negotiations with banks in response to the extremely difficult conditions in international money markets following the collapse of the American investment bank Lehman and other market issues. (H)
